Top Consumer Fraud Schemes
article-498

Top Consumer Fraud Schemes

Consumer fraud happens when someone experiences a financial loss due to deceitful, unjust, or untrue business practices. Identity theft involves stealing personal information, which thieves can use to assume your identity, open credit cards, and bank accounts, and make unauthorized purchases. Mortgage scams target homeowners in a difficult financial situation and aim to deceive them into giving away their money. Credit and debit card fraud happens when someone gets hold of your card details and uses them to buy things or trick you into thinking they can lower your credit card interest rate. Fake charities and lotteries prey on people's sympathy or greed. Debt collection fraud attempts to collect payment for outstanding bills, regardless of whether they belong to you.

Basics

Financial and personal losses resulting from deceptive, unfair, misleading, or false business practices define consumer fraud. While senior citizens and college students are frequent targets, fraud poses a risk to all consumers.

To counteract this threat, the Consumer Financial Protection Bureau (CFPB), a government agency, works diligently to ensure the fair treatment of consumers by banks and financial institutions. "As scammers continuously devise new tactics to seize your funds, awareness becomes your shield," emphasizes the CFPB. To fortify your defenses, here are essential insights into prevalent frauds and protective measures.

Identity Theft

Identity theft, a dangerous crime, involves the theft of personal information, such as your Social Security number, bank account details, and credit card information, often through data mining.

These criminals intend to utilize your data to assume your identity, granting them access to your bank accounts, facilitating credit card misuse, acquiring loans, exploiting your health insurance for medical expenses, and fraudulently claiming tax refunds.

Indicators of Identity Theft

Remain vigilant, as these signs may indicate that you have fallen victim to identity theft:

  1. Unexpected withdrawals from your bank accounts.
  2. Discontinuation of your regular mail, including bills and financial statements, suggesting address alteration by criminals to open financial accounts under your name.
  3. Receiving calls from debt collectors regarding unfamiliar credit cards and debts.
  4. Identification of unfamiliar accounts on your credit report.
  5. Receiving medical bills for treatments you never underwent.
  6. Receiving notifications from the IRS regarding multiple tax filings in your name.
  7. Noticing notices or being informed about data breaches at companies you engage with.

Actions to Take

If you suspect identity theft, promptly take the following steps:

  1. Visit IdentityTheft.gov, a comprehensive website managed by the Federal Trade Commission (FTC), to initiate the recovery of your identity and mitigate any damage incurred.
  2. Contact relevant companies where fraudulent activity is suspected to report the crime, close or freeze affected accounts, and modify login credentials and PINs.
  3. Activate a free fraud alert with credit bureaus and obtain complimentary credit reports.
  4. File an official complaint with the FTC through the provided IdentityTheft.gov link.
  5. Notify local law enforcement to establish local monitoring of the theft.

By taking immediate action and following these precautions, you can protect yourself against the perils of identity theft.

Mortgage Fraud

The FBI encounters numerous mortgage fraud cases annually, with today's scams predominantly targeting distressed homeowners, as highlighted by the FBI's Financial Institution Fraud Unit. Perpetrators, often real estate and mortgage professionals, exploit their specialized knowledge and authority to carry out fraudulent schemes like foreclosure rescue, loan modification, and equity skimming.

Indicators of Mortgage Fraud

To protect yourself from mortgage fraud, be mindful of the following warning signs, as advised by the National Crime Prevention Council:

  1. Assurances of loan modification or foreclosure prevention that seem too good to be true.
  2. Demanding upfront fees for services prior to their provision.
  3. Offers of a money-back guarantee, instructions to cease mortgage payments or avoid contacting your mortgage servicer, and requests to redirect payments to an alternate entity.
  4. Noticeably prolonged home purchase process compared to standard timelines.
  5. Evading or incomplete responses to your inquiries.
  6. Requesting signatures on documents without allowing adequate time for reading and comprehension.

In 2021, consumers collectively suffered a staggering loss of $5.8 billion to fraudulent activities, exhibiting an alarming 70% increase from the previous year.

Actions to Take

To fortify your defenses against mortgage fraud, adhere to the following recommendations provided by the FBI:

  1. Prioritize referrals and avoid unsolicited contacts about real estate transactions.
  2. Verify the licensing credentials of individuals involved in your business dealings.
  3. Exercise caution and refrain from engaging in high-pressure transactions or those that appear too good to be true.
  4. Refrain from signing any documents that you do not fully comprehend.
  5. Consult a reputable credit counselor or attorney for expert guidance.

By remaining vigilant and implementing these precautions, you can mitigate the risks associated with mortgage fraud.

Credit and Debit Card Fraud

Within the realm of consumer fraud, credit, and debit card fraud stands as a prevalent threat. This occurs when unauthorized individuals steal, find, or obtain card information to engage in fraudulent activities such as unauthorized purchases, cash withdrawals, or other deceitful transactions. Fortunately, under the Fair Credit Billing Act, your liability is limited to a maximum of $50, or in some cases, you may not bear any cost at all, depending on your bank or credit card issuer.

Indicators of Credit and Debit Card Fraud

To safeguard yourself against credit and debit card fraud, remain vigilant for the following red flags:

  1. Identification of unrecognized charges on your statement.
  2. Observation of multiple small-dollar transactions that may indicate testing the card's validity before a significant purchase.
  3. Unfamiliar company names associated with charges.
  4. Charges originating from distant or unfamiliar locations you have not visited.
  5. Unexpected and substantial decreases in your available credit balance.
  6. Receipt of phone calls requesting credit or debit card information.

Actions to Take

Combat credit and debit card fraud by implementing the following proactive measures:

  1. Regularly monitor your accounts and promptly report any suspicious activity to your bank.
  2. If the bank's response is unsatisfactory, escalate the matter by filing a complaint with the Consumer Financial Protection Bureau.
  3. Cancel the compromised card or freeze your account to prevent further unauthorized transactions.
  4. Exercise caution and refrain from sharing card information with callers who should already possess such details.
  5. If you decide to verify a call, contact your bank using a known and verified phone number.

By adhering to these precautions and responding swiftly to potential fraud, you can effectively combat credit and debit card fraud, ensuring the security of your financial transactions.

Deceptive Interest Rate Reduction Robocalls

The Federal Trade Commission warns of a new variant of credit card fraud: robocalls falsely promise to reduce your interest rate for a fee. These schemes are typically scams and hold no greater efficacy in persuading credit card companies to lower rates than your direct call to the company, which is free of charge. Moreover, these fraudsters may exploit your personal information for identity theft, compounding the risk.

Indicators of Deceptive Robocalls

The FTC identifies common elements within rate reduction robocall scams:

  1. Unsolicited calls originating from unfamiliar or untrusted sources.
  2. Promises of zero or extremely low credit card rates, accompanied by guarantees.
  3. Time-limited offers create a sense of urgency.
  4. False claims of possessing a special affiliation with credit card companies.
  5. Request for upfront fees before taking any action.
  6. Solicitation of personal information, including Social Security numbers.

Actions to Take

To shield yourself from this form of fraud, adhere to the following protective measures:

  1. If you seek a lower credit card interest rate, personally contact the customer service number printed on the back of your card—this service is free.
  2. Under no circumstances disclose credit card details, bank account numbers, Social Security numbers, or any other personal information to telemarketers.
  3. Reject any agreement requiring an upfront fee, as debt relief services cannot legally charge fees before delivering the service.
  4. Disconnect or refrain from answering unsolicited prerecorded sales calls.

By exercising caution and implementing these precautions, you can effectively fortify yourself against the perils of deceptive robocalls, ensuring the security of your financial well-being.

Fake Charities

Unscrupulous individuals exploit the same tactics employed by legitimate charities to deceive and misappropriate funds, as revealed by the Federal Trade Commission (FTC). It is essential to exercise caution and ensure transparency before making any donations.

Indicators of a Fake Charity

Recognize the following unmistakable signs that may indicate dealings with a fraudulent charity:

  1. Imposing pressure to donate immediately, to dispatching a courier to collect contributions.
  2. Sole acceptance of cash, gift cards, or wire transfers as forms of payment.
  3. Receiving a gratitude message for a donation, you did not make a ploy to make you believe you are already supporting the organization.
  4. Utilizing a name that sounds familiar but does not precisely match the legitimate organization it seeks to emulate.
  5. Failure or inability of the caller or solicitor to provide comprehensive information about the organization.
  6. Insisting that you must donate to participate in a sweepstake.

Actions to Take

To safeguard yourself against fake charities, follow the recommendations outlined by the FTC:

  1. Obtain the contact details of the charity and conduct thorough research using credible sources such as BBB Wise Giving Alliance, Charity Navigator, CharityWatch, or GuideStar.
  2. Disregard high-pressure appeals, especially those demanding immediate payment.
  3. Refrain from making cash donations and opt for safer transaction methods.
  4. Exercise caution when donating after natural disasters, as this is when fraudulent individuals exploit vulnerable situations.
  5. Avoid disclosing personal information such as Social Security numbers or bank account details.
  6. Be proactive and establish an annual giving plan in advance, adding the charity's name for future consideration.

By practicing vigilance and adhering to these precautions, you can protect yourself from falling victim to fraudulent charities, ensuring your contributions truly make a positive impact.

Prize and Lottery Fraud

Prize and lottery fraud manifests through various guises, such as sweepstakes, drawings, and foreign lotteries. This form of fraud primarily targets older individuals and often initiates through phone calls or postcards. Despite receiving tens of thousands of complaints annually, the true extent of the problem remains underestimated due to unreported cases.

Indicators of a Fraudulent Lottery or Sweepstakes

Beware of the following telltale signs that indicate a fake lottery or sweepstakes:

  1. Receiving a notification claiming you are a "winner" but requesting payment to cover taxes or administrative costs.
  2. Receiving winner notifications via bulk mail.
  3. Being compelled to attend a meeting to claim your prize.
  4. Having no recollection of entering the lottery or sweepstakes.
  5. Receiving subsequent payment requests or being contacted by other organizations claiming you have won their lottery as well.

Actions to Take

To protect yourself from prize and lottery fraud, adopt these preventive measures:

  1. Refrain from making payments to collect lottery or sweepstakes winnings. Legitimate taxes can be deducted from the actual winnings.
  2. Never share credit card or bank account numbers, and avoid sending money, even if the organization issues a check (which is likely counterfeit).
  3. If you suspect the prize may be genuine, research the company or organization's name and contact them directly using a verified phone number.
  4. Report any suspected fraudulent schemes to the FTC.

By adhering to these preventive actions, you can shield yourself against prize and lottery fraud, ensuring your financial well-being and avoiding falling victim to scams.

Debt Collection Fraud

Instances of fraudulent debt collection arise when scammers impersonate collection agencies, making unwarranted demands for fictitious outstanding debts. It is crucial to differentiate between legitimate debt collectors and impostors. Additionally, individuals with actual unpaid debts subject to collection are entitled to specific rights under the Fair Debt Collection Practices Act (FDCPA).

Indicators of Debt Collection Fraud

To identify potential debt collection scams, be attentive to the following signs:

  1. Withheld information, such as the precise debt amount, creditor's name, your right to dispute the debt, or details enabling verification of the collector's legitimacy.
  2. Pressuring for payment through cash, money transfers, or prepaid debit cards.
  3. Threats of legal consequences, including jail time, or misleading claims of being a government official.
  4. Intimidation tactics, such as threatening to disclose your debt status to family members, employers, or others.
  5. Solicitation of personal information, including account numbers or Social Security numbers.
  6. Violation of FDCPA regulations by making calls outside permitted hours (before 8 a.m. or after 9 p.m.).

Actions to Take

If you suspect being targeted by a debt collection scammer, implement the following measures:

  1. Refrain from providing any personal information over the phone or via email.
  2. Request a callback number, as well as the caller's name, company name, and physical address.
  3. Contact the mentioned creditor directly to inquire about the debt, seeking comprehensive information, including the debt's nature and the contracted collection agency.
  4. Regularly review your credit reports, accessible for free every 12 months, to identify any reported debts. Note that not all creditors report, so this method may not capture all legitimate debts.
  5. Familiarize yourself with your rights under the FDCPA, as outlined above.
  6. If you believe you have fallen victim to a scam, file a complaint with the FTC or your state's Attorney General's Office.

By exercising caution and promptly taking these actions, you can fortify yourself against debt collection fraud, ensuring your financial security and safeguarding your rights.

Conclusion

Consumer fraud encompasses various forms of deceitful practices that lead to financial losses. Identity theft, mortgage fraud, credit and debit card fraud, deceptive robocalls, fake charities, prize and lottery fraud, and debt collection fraud are all prevalent types of scams targeting unsuspecting individuals. Recognizing the signs of these fraudulent activities is crucial in protecting oneself from falling victim to scams. By staying vigilant, following preventive measures, and promptly reporting suspected scams to relevant authorities, individuals can mitigate the risks associated with consumer fraud and safeguard their financial well-being.

Consumer Fraud
Consumer Financial Protection Bureau (CFPB)
Federal Trade Commission (FTC)
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Hexn operates under HEXN (CZ) s.r.o. and HEXN Markets LLC. HEXN (CZ) s.r.o. is incorporated in the Czech Republic with the company number 19300662, registered office at Cimburkova 916/8, Žižkov, Praha. HEXN (CZ) s.r.o. is registered as a virtual assets service provider (VASP). HEXN Markets LLC is incorporated in St. Vincent and Grenadines with the company number 2212 LLC 2022, registered office at Beachmont Business Centre, 379, Kingstown, Saint Vincent and the Grenadines